SUBCHAPTER A—NATIONAL SECURITY INDUSTRIAL BASE REGULATIONS · Subpart L—Miscellaneous Provisions ... parts D through L. [49 FR 30414, July 30, 1984. ... Letters of Understanding,

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SUBCHAPTER A—NATIONAL SECURITY INDUSTRIAL BASE REGULATIONS

PART 700—DEFENSE PRIORITIES AND ALLOCATIONS SYSTEM

Subpart A—Purpose

Sec. 700.1 Purpose of this regulation.

Subpart B—Overview

700.2 Introduction. 700.3 Priority ratings and rated orders. 700.4 Priorities and allocations in a na-

tional emergency. 700.5 Special priorities assistance. 700.6 Official actions. 700.7 Compliance.

Subpart C—Definitions

700.8 Definitions.

Subpart D—Industrial Priorities

700.10 Delegation of authority. 700.11 Priority ratings. 700.12 Elements of a rated order. 700.13 Acceptance and rejection of rated or-

ders. 700.14 Preferential scheduling. 700.15 Extension of priority ratings. 700.16 Changes or cancellations of priority

ratings and rated orders. 700.17 Use of rated orders. 700.18 Limitations on placing rated orders.

Subpart E—Industrial Priorities for Energy Programs

700.20 Use of priority ratings. 700.21 Application for priority rating au-

thority.

Subpart F—National emergency Preparedness and Critical Items

700.30 Priorities and allocations in a na-tional emergency.

700.31 Metalworking machines.

Subpart G [Reserved]

Subpart H—Special Priorities Assistance

700.50 General provisions. 700.51 Requests for priority rating author-

ity. 700.52 Examples of assistance. 700.53 Criteria for assistance. 700.54 Instances where assistance may not

be provided.

700.55 Assistance programs with Canada and other nations.

Subpart I—Official Actions

700.60 General provisions. 700.61 Rating Authorizations. 700.62 Directives. 700.63 Letters of Understanding.

Subpart J—Compliance

700.70 General provisions. 700.71 Audits and investigations. 700.72 Compulsory process. 700.73 Notification of failure to comply. 700.74 Violations, penalties, and remedies. 700.75 Compliance conflicts.

Subpart K—Adjustments, Exceptions, and Appeals

700.80 Adjustments or exceptions. 700.81 Appeals.

Subpart L—Miscellaneous Provisions

700.90 Protection against claims. 700.91 Records and reports. 700.92 Applicability of this regulation and

official actions. 700.93 Communications. SCHEDULE I TO PART 700—APPROVED PRO-

GRAMS AND DELEGATE AGENCIES APPENDIX I TO PART 700—FORM BIS–999–RE-

QUEST FOR SPECIAL PRIORITIES ASSIST-ANCE

AUTHORITY: Titles I and VII of the Defense Production Act of 1950, as amended (50 U.S.C. App. 2061, et seq.), Title VI of the Robert T. Stafford Disaster Relief and Emergency As-sistance Act (42 U.S.C. 5195 et seq.), Executive Order 12919, 59 FR 29525, 3 CFR, 1994 Comp. 901, and Executive Order 13286, 68 FR 10619, 3 CFR, 2003 Comp. 166; section 18 of the Selec-tive Service Act of 1948 (50 U.S.C. App. 468), 10 U.S.C. 2538, 50 U.S.C. 82, and Executive Order 12742, 56 FR 1079, 3 CFR, 1991 Comp. 309; and Executive Order 12656, 53 FR 226, 3 CFR, 1988 Comp. 585.

SOURCE: 49 FR 30414, July 30, 1984, unless otherwise noted. Redesignated at 54 FR 601, Jan. 9, 1989.

Subpart A—Purpose

§ 700.1 Purpose of this regulation. (a) Title I of the Defense Production

Act of 1950, as amended (50 U.S.C. App. 2061, et seq.) (Defense Production Act),

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15 CFR Ch. VII (1–1–12 Edition) § 700.2

authorizes the President: to require the priority performance of contracts and orders necessary or appropriate to pro-mote the national defense over other contracts or orders; to allocate mate-rials, services, and facilities as nec-essary or appropriate to promote the national defense; and to require the al-location of, or the priority performance under contracts or orders relating to, supplies of materials, equipment, and services in order to assure domestic en-ergy supplies for national defense needs.

(b) Section 18 of the Selective Service Act of 1948 (50 U.S.C. app. 468) (Selec-tive Service Act) authorizes the Presi-dent to place an order with a supplier for any articles or materials required for the exclusive use of the U.S. armed forces whenever the President deter-mines that in the interest of national security, prompt delivery of the arti-cles and materials is required. The sup-plier must give precedence to the order so as to deliver the articles or mate-rials in a required time period. 10 U.S.C. 2538, and 50 U.S.C. 82, provide similar authority specifically for De-partment of Defense procurement, but only in time of war or when war is im-minent.

(c) Section 602(b) of the Robert T. Stafford Disaster Relief and Emer-gency Assistance Act (42 U.S.C. 5195a(b)) provides that the terms ‘‘na-tional defense’’ and ‘‘defense’’ as used in the Defense Production Act includes ‘‘emergency preparedness activities’’ conducted pursuant to Title VI of the Stafford Act. The definition of ‘‘na-tional defense’’ in section 702(14) of the Defense Production Act provides that this term includes ‘‘emergency pre-paredness activities’’ conducted pursu-ant to Title VI of the Stafford Act and ‘‘critical infrastructure protection and restoration.’’

(d) The Defense Priorities and Allo-cations System (DPAS) regulation im-plements the priorities and allocations authority of the Defense Production Act and as this authority pertains to Title VI of the Stafford Act, and the priorities authority of the Selective Service Act and related statutes, all with respect to industrial resources. The DPAS ensures the timely avail-ability of industrial resources for ap-

proved programs and provides an oper-ating system to support rapid indus-trial response to a national emergency.

(e) To aid in understanding and using the DPAS, an overview of its major provisions is incorporated into this regulation as subpart B—Overview. The full text of the DPAS is found in sub-parts D through L.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as amended at 63 FR 31921, June 11, 1998; 71 FR 39527, July 13, 2006]

Subpart B—Overview

§ 700.2 Introduction.

(a) Certain national defense and en-ergy programs (including emergency preparedness activities) are approved for priorities and allocations support. For example, military aircraft produc-tion, ammunition, and certain pro-grams which maximize domestic en-ergy supplies are ‘‘approved programs.’’ A complete list of currently approved programs is provided at Schedule I to this part.

(b) The Department of Commerce ad-ministers the DPAS to ensure the timely delivery of industrial items to meet approved program requirements.

(c) Commerce has delegated authori-ties to place priority ratings on con-tracts or orders necessary or appro-priate to promote the national defense to the government agencies that issue such contracts or orders. Schedule I in-cludes a list of agencies delegated this authority.


§ 700.3 Priority ratings and rated or-ders.

(a) Rated orders are identified by a priority rating consisting of the rat-ing—either DX or DO—and a program identification symbol. Rated orders take preference over all unrated orders as necessary to meet required delivery dates. Among rated orders, DX rated orders take preference over DO rated orders. Program identification symbols

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Bureau of Industry and Security, Commerce § 700.7

indicate which approved program is in-volved with the rated order. For exam-ple, A1 identifies defense aircraft pro-grams and A7 signifies defense elec-tronic programs. The program identi-fication symbols, in themselves, do not connote any priority.

(b) Persons receiving rated orders must give them preferential treatment as required by this regulation. This means a person must accept and fill a rated order for items that the person normally supplies. The existence of previously accepted unrated or lower rated orders is not sufficient reason for rejecting a rated order. Persons are re-quired to reschedule unrated orders if they conflict with performance against a rated order. Similarly, persons must reschedule DO rated orders if they con-flict with performance against a DX rated order.

(c) All rated orders must be sched-uled to the extent possible to ensure delivery by the required delivery date.

(d) Persons who receive rated orders must in turn place rated orders with their suppliers for the items they need to fill the orders. This provision en-sures that suppliers will give priority treatment to rated orders from con-tractor to subcontractor to suppliers throughout the procurement chain.

(e) Persons may place a priority rat-ing on orders only when they are in re-ceipt of a rated order, have been explic-itly authorized to do so by the Depart-ment of Commerce or a Delegate Agen-cy, or are otherwise permitted to do so by this regulation.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as amended at 63 FR 31921, June 11, 1998]

§ 700.4 Priorities and allocations in a national emergency.

(a) In the event of a national emer-gency, special rules may be established as needed to supplement this part, thus ensuring rapid industrial response and the timely availability of critical in-dustrial items and facilities to meet the urgent national defense require-ments, including domestic emergency preparedness requirements, of approved programs.

(b) The special rules established in response to the emergency may include provisions for the taking of certain

emergency official actions and the al-location of critical and scarce mate-rials and facilities.

[63 FR 31921, June 11, 1998]

§ 700.5 Special priorities assistance.

(a) The DPAS is designed to be large-ly self-executing. However, from time- to-time production or delivery prob-lems will arise. In this event, special priorities assistance is available from Commerce and from the Delegate Agencies.

(b) Special priorities assistance is available for any reason consistent with this regulation. Generally, special priorities assistance is provided to ex-pedite deliveries, resolve delivery con-flicts, place rated orders, locate sup-pliers, or to verify information sup-plied by customers and vendors. Spe-cial priorities assistance may also be used to request rating authority for items not automatically ratable.

§ 700.6 Official actions.

When necessary, Commerce takes specific official actions to implement or enforce the provisions of this regula-tion and to provide special priorities assistance. Such actions may include the issuance of: Rating Authorizations, Directives, Letters of Understanding, Set-asides, and compliance documents (Administrative Subpoenas, Demands for Information, and Inspection Au-thorizations).

§ 700.7 Compliance.

(a) Compliance with the provisions of this regulation and official actions is required by the Defense Production Act and the Selective Service Act and re-lated statutes. Violators are subject to criminal penalties.

(b) Any person who places or receives a rated order should be thoroughly fa-miliar with, and must comply with, the provisions of this regulation.


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Subpart C—Definitions § 700.8 Definitions.

In addition to the definitions pro-vided in Section 702 of the Defense Pro-duction Act (excepting the definition of ‘‘industrial resources’’) and Section 602(a) of the Stafford Act, the following definitions pertain to all sections of this part:

Approved program. A program deter-mined as necessary or appropriate for priorities and allocations support to promote the national defense by the Secretary of Defense, the Secretary of Energy, or the Secretary of Homeland Security, under the authority of the Defense Production Act, the Stafford Act, and Executive Order 12919, or the Selective Service Act and related stat-utes and Executive Order 12742.

Construction. The erection, addition, extension, or alteration of any build-ing, structure, or project, using mate-rials or products which are to be an in-tegral and permanent part of the build-ing, structure, or project. Construction does not include maintenance and re-pair.

Delegate Agency. A government agen-cy authorized by delegation from the Department of Commerce to place pri-ority ratings on contracts or orders needed to support approved programs.

Defense Production Act. the Defense Production Act of 1950, as amended (50 U.S.C. App. 2061, et seq.).

Industrial resources—all materials, services, and facilities, including con-struction materials, the authority for which has not been delegated to other agencies under Executive Order 12919. This term also includes the term ‘‘item’’ as defined and used in this part.

Item. Any raw, in process, or manu-factured material, article, commodity, supply, equipment, component, acces-sory, part, assembly, or product of any kind, technical information, process, or service.

Maintenance and repair and operating supplies (MRO):

(a) Maintenance is the upkeep nec-essary to continue any plant, facility, or equipment in working condition.

(b) Repair is the restoration of any plant, facility, or equipment to work-ing condition when it has been ren-dered unsafe or unfit for service by

wear and tear, damage, or failure of parts.

(c) Operating supplies are any items carried as operating supplies according to a person’s established accounting practice. Operating supplies may in-clude hand tools and expendable tools, jigs, dies, fixtures used on production equipment, lubricants, cleaners, chemi-cals and other expendable items.

(d) MRO does not include items pro-duced or obtained for sale to other per-sons or for installation upon or attach-ment to the property of another per-son, or items required for the produc-tion of such items; items needed for the replacement of any plant, facility, or equipment; or items for the improve-ment of any plant, facility, or equip-ment by replacing items which are still in working condition with items of a new or different kind, quality, or de-sign.

Official action. An action taken by Commerce under the authority of the Defense Production Act, the Selective Service Act and related statutes, and this regulation. Such actions include the issuance of Set-asides, Rating Au-thorizations, Directives, Letters of Un-derstanding, Demands for Information, Inspection Authorizations, and Admin-istrative Subpoenas.

Person—any individual, corporation, partnership, association, or any other organized group of persons, or legal successor or representative thereof; or any authorized State or local govern-ment or agency thereof; and for pur-poses of administration of this part, in-cludes the United States Government and any authorized foreign government or agency thereof, delegated authority as provided in this part.

Production equipment. Any item of capital equipment used in producing materials or furnishing services that has a unit acquisition cost of $2,500 or more, an anticipated service life in ex-cess of one year, and the potential for maintaining its integrity as a capital item.

Rated order. A prime contract, a sub-contract, or a purchase order in sup-port of an approved program issued in accordance with the provisions of this regulation.

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Selective Service Act and related stat-utes—Section 18 of the Selective Serv-ice Act of 1948 (50 U.S.C. app. 468), 10 U.S.C. 2538, and 50 U.S.C. 82.

Set-aside. The amount of an item for which a supplier must reserve order book space in anticipation of the re-ceipt of rated orders.

Stafford Act—Title VI (Emergency Preparedness) of the Robert T. Stafford Disaster Relief and Emergency Assist-ance Act, as amended (42 U.S.C. 5195 et seq.).

[49 FR 30414, July 30, 1984; 49 FR 50172, Dec. 27, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as amended at 63 FR 31921, June 11, 1998; 71 FR 39528, July 13, 2006]

Subpart D—Industrial Priorities

§ 700.10 Delegation of authority. (a) The priorities and allocations au-

thorities of the President under Title I of the Defense Production Act with re-spect to industrial resources have been delegated to the Secretary of Com-merce under Executive Order 12919 of June 3, 1994 (59 FR 29525). The priorities authorities of the President under the Selective Service Act and related stat-utes with respect to industrial re-sources have also been delegated to the Secretary of Commerce under Execu-tive Order 12742 of January 8, 1991 (56 FR 1079).

(b) Within the Department of Com-merce, these responsibilities have been assigned to the Office of Strategic In-dustries and Economic Security. The Department of Commerce has author-ized the Delegate Agencies to assign priority ratings to orders for items needed for approved programs.


§ 700.11 Priority ratings. (a) Levels of priority. (1) There are two

levels of priority established by this regulation, identified by the rating symbols ‘‘DO’’ and ‘‘DX’’.

(2) All DO rated orders have equal priority with each other and take pref-erence over unrated orders. All DX rated orders have equal priority with each other and take preference over DO rated orders and unrated orders. (For

resolution of conflicts among rated or-ders of equal priority, see § 700.14(c).)

(3) In addition, a Directive issued by Commerce takes preference over any DX rated order, DO rated order, or unrated order, as stipulated in the Di-rective. (For a full discussion of Direc-tives, see § 700.62.)

(b) Program identification symbols. Pro-gram identification symbols indicate which approved program is being sup-ported by a rated order. The list of ap-proved programs and their identifica-tion symbols are listed in Schedule I. For example, A1 identifies defense air-craft programs and A7 signifies defense electronic programs. Program identi-fication symbols, in themselves, do not connote any priority.

(c) Priority ratings. A priority rating consists of the rating symbol—DO and DX—and the program identification symbol, such as A1, C2, or N1. Thus, a contract for the production of an air-craft will contain a DO-A1 or DX-A1 priority rating. A contract for a radar set will contain a DO-A7 or DX-A7 pri-ority rating.


§ 700.12 Elements of a rated order.

Each rated order must include: (a) The appropriate priority rating

(e.g. DO-A1, DX-A4, DO-H1); (b) A required delivery date or dates.

The words ‘‘immediately’’ or ‘‘as soon as possible’’ do not constitute a deliv-ery date. A ‘‘requirements contract’’, ‘‘basic ordering agreement’’, ‘‘prime vendor contract’’, or similar procure-ment document bearing a priority rat-ing may contain no specific delivery date or dates and may provide for the furnishing of items from time-to-time or within a stated period against spe-cific purchase orders, such as ‘‘calls’’, ‘‘requisitions’’, and ‘‘delivery orders’’. These purchase orders must specify a required delivery date or dates and are to be considered as rated as of the date of their receipt by the supplier and not as of the date of the original procure-ment document;

(c) The written signature on a manu-ally placed order, or the digital signa-ture or name on an electronically

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placed order, of an individual author-ized to sign rated orders for the person placing the order. The signature or use of the name certifies that the rated order is authorized under this part and that the requirements of this part are being followed; and

(d) A statement that reads in sub-stance:

This is a rated order certified for national defense use, and you are required to follow all the provisions of the Defense Priorities and Allocations System regulation (15 CFR part 700).


§ 700.13 Acceptance and rejection of rated orders.

(a) Mandatory acceptance. (1) Except as otherwise specified in this section, a person shall accept every rated order received and must fill such orders re-gardless of any other rated or unrated orders that have been accepted.

(2) A person shall not discriminate against rated orders in any manner such as by charging higher prices or by imposing different terms and condi-tions than for comparable unrated or-ders.

(b) Mandatory rejection. Unless other-wise directed by Commerce:

(1) A person shall not accept a rated order for delivery on a specific date if unable to fill the order by that date. However, the person must inform the customer of the earliest date on which delivery can be made and offer to ac-cept the order on the basis of that date. Scheduling conflicts with previously accepted lower rated or unrated orders are not sufficient reason for rejection under this section.

(2) A person shall not accept a DO rated order for delivery on a date which would interfere with delivery of any previously accepted DO or DX rated orders. However, the person must offer to accept the order based on the earliest delivery date otherwise pos-sible.

(3) A person shall not accept a DX rated order for delivery on a date which would interfere with delivery of any previously accepted DX rated or-ders, but must offer to accept the order

based on the earliest delivery date oth-erwise possible.

(4) If a person is unable to fill all the rated orders of equal priority status re-ceived on the same day, the person must accept, based upon the earliest delivery dates, only those orders which can be filled, and reject the other or-ders. For example, a person must ac-cept order A requiring delivery on De-cember 15 before accepting order B re-quiring delivery on December 31. How-ever, the person must offer to accept the rejected orders based on the ear-liest delivery dates otherwise possible.

(c) Optional rejection. Unless other-wise directed by Commerce, rated or-ders may be rejected in any of the fol-lowing cases as long as a supplier does not discriminate among customers:

(1) If the person placing the order is unwilling or unable to meet regularly established terms of sale or payment;

(2) If the order is for an item not sup-plied or for a service not performed;

(3) If the order is for an item pro-duced, acquired, or provided only for the supplier’s own use for which no or-ders have been filled for two years prior to the date of receipt of the rated order. If, however, a supplier has sold some of these items, the supplier is ob-ligated to accept rated orders up to that quantity or portion of production, whichever is greater, sold within the past two years;

(4) If the person placing the rated order, other than the U.S. Government, makes the item or performs the service being ordered;

(5) If acceptance of a rated order or performance against a rated order would violate any other regulation, of-ficial action, or order of the Depart-ment of Commerce issued under the au-thority of the Defense Production Act or the Selective Service Act and re-lated statutes [See § 700.75].

(d) Customer notification requirements. (1) A person must accept or reject a rated order and transmit the accept-ance or rejection in writing (hard copy), or in electronic format, within fifteen (15) working days after receipt of a DO rated order and within ten (10) working days after receipt of a DX rated order. If the order is rejected, the person must also provide the reasons

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for the rejection, pursuant to para-graphs (b) and (c) of this section, in writing (hard copy) or electronic for-mat.

(2) If a person has accepted a rated order and subsequently finds that ship-ment or performance will be delayed, the person must notify the customer immediately, give the reasons for the delay, and advise of a new shipment or performance date. If notification is given verbally, written or electronic confirmation must be provided within five (5) working days.

(The information collection requirements in paragraphs (d)(1) and (d)(2) are approved by the Office of Management and Budget under OMB control number 0694–0053)

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as amended at 63 FR 31922, June 11, 1998; 70 FR 10864, Mar. 7, 2005]

§ 700.14 Preferential scheduling. (a) A person must schedule oper-

ations, including the acquisition of all needed production items, in a timely manner to satisfy the delivery require-ments of each rated order. Modifying production or delivery schedules is nec-essary only when required delivery dates for rated orders cannot otherwise be met.

(b) DO rated orders must be given production preference over unrated or-ders, if necessary to meet required de-livery dates, even if this requires the diversion of items being processed or ready for delivery against unrated or-ders. Similarly, DX rated orders must be given preference over DO rated or-ders and unrated orders.

Examples: If a person receives a DO rated order with a delivery date of June 3 and if meeting that date would mean delaying pro-duction or delivery of an item for an unrated order, the unrated order must be delayed. If a DX rated order is received calling for deliv-ery on July 15 and a person has a DO rated order requiring delivery on June 2 and oper-ations can be scheduled to meet both deliv-eries, there is no need to alter production schedules to give any additional preference to the DX rated order.

(c) Conflicting rated orders. (1) If a per-son finds that delivery or performance against any accepted rated orders con-flicts with the delivery or performance against other accepted rated orders of equal priority status, the person shall

give preference to the conflicting or-ders in the sequence in which they are to be delivered or performed (not to the receipt dates). If the conflicting rated orders are scheduled to be delivered or performed on the same day, the person shall give preference to those orders which have the earliest receipt dates.

(2) If a person is unable to resolve rated order delivery or performance conflicts under this section, the person should promptly seek special priorities assistance as provided in §§ 700.50 through 700.54. If the person’s customer objects to the rescheduling of delivery or performance of a rated order, the customer should promptly seek special priorities assistance as provided in §§ 700.50 through 700.54. For any rated order against which delivery or per-formance will be delayed, the person must notify the customer as provided in § 700.13(d)(2).

(d) If a person is unable to purchase needed production items in time to fill a rated order by its required delivery date, the person must fill the rated order by using inventoried production items. A person who uses inventoried items to fill a rated order may replace those items with the use of a rated order as provided in § 700.17(b).


§ 700.15 Extension of priority ratings.

(a) A person must use rated orders with suppliers to obtain items needed to fill a rated order. The person must use the priority rating indicated on the customer’s rated order, except as oth-erwise provided in this regulation or as directed by the Department of Com-merce.

For example, if a person is in receipt of a DO-A3 rated order for a navigation system and needs to purchase semiconductors for its manufacture, that person must use a DO-A3 rated order to obtain the needed semiconduc-tors.

(b) The priority rating must be in-cluded on each successive order placed to obtain items needed to fill a cus-tomer’s rated order. This continues from contractor to subcontractor to supplier throughout the entire procure-ment chain.

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§ 700.16 Changes or cancellations of priority ratings and rated orders.

(a) The priority rating on a rated order may be changed or cancelled by:

(1) An official action of the Depart-ment of Commerce; or

(2) Written notification from the per-son who placed the rated order (includ-ing a Delegate Agency).

(b) If an unrated order is amended so as to make it a rated order, or a DO, rating is changed to a DX rating, the supplier must give the appropriate preferential treatment to the order as of the date the change is received by the supplier.

(c) An amendment to a rated order that significantly alters a supplier’s original production or delivery sched-ule shall constitute a new rated order as of the date of its receipt. The sup-plier must accept or reject the amend-ed order according to the provisions of § 700.13.

(d) The following amendments do not constitute a new rated order: a change in shipping destination; a reduction in the total amount of the order; an in-crease in the total amount of the order which has negligible impact upon de-liveries; a minor variation in size or de-sign; or a change which is agreed upon between the supplier and the customer.

(e) If a person no longer needs items to fill a rated order, any rated orders placed with suppliers for the items, or the priority rating on those orders, must be cancelled.

(f) When a priority rating is added to an unrated order, or is changed or can-celled, all suppliers must be promptly notified in writing.

§ 700.17 Use of rated orders.

(a) A person must use rated orders to obtain:

(1) Items which will be physically in-corporated into other items to fill rated orders, including that portion of such items normally consumed, or con-verted into scrap or by-products, in the course of processing;

(2) Containers or other packaging materials required to make delivery of the finished items against rated orders;

(3) Services, other than contracts of employment, needed to fill rated or-ders; and

(4) MRO needed to produce the fin-ished items to fill rated orders. How-ever, for MRO, the priority rating used must contain the program identifica-tion symbol H7 along with the rating symbol contained on the customer’s rated order. For example, a person in receipt of a DO-A3 rated order, who needs MRO, would place a DO-H7 rated order with the person’s supplier.

(b) A person may use a rated order to replace inventoried items (including finished items) if such items were used to fill rated orders, as follows:

(1) The order must be placed within 90 days of the date of use of the inven-tory.

(2) A DO rating symbol and the pro-gram identification symbol indicated on the customer’s rated order must be used on the order. A DX rating symbol may not be used even if the inventory was used to fill a DX rated order.

(3) If the priority ratings on rated or-ders from one customer or several cus-tomers contain different program iden-tification symbols, the rated orders may be combined. In this case, the pro-gram identification symbol H1 must be used (i.e., DO-H1).

(c) A person may combine DX and DO rated orders from one customer or sev-eral customers if the items covered by each level of priority are identified sep-arately and clearly. If different pro-gram identification symbols are indi-cated on those rated orders of equal priority, the person must use the pro-gram identification symbol H1 (i.e., DO-H1 or DX-H1).

(d) Combining rated and unrated or-ders. (1) A person may combine rated and unrated order quantities on one purchase order provided that:

(i) The rated quantities are sepa-rately and clearly identified; and

(ii) The four elements of a rated order, as required by § 700.12, are in-cluded on the order with the statement required in § 700.12(d) modified to read in substance:

This purchase order contains rated order quantities certified for national defense use, and you are required to follow all the provi-sions of the Defense Priorities and Alloca-tions System regulation (15 CFR part 700) only as it pertains to the rated quantities.

(2) A supplier must accept or reject the rated portion of the purchase order

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as provided in § 700.13 and give pref-erential treatment only to the rated quantities as required by this part. This part may not be used to give pref-erential treatment to the unrated por-tion of the order.

(3) Any supplier who believes that rated and unrated orders are being combined in a manner contrary to the intent of this regulation or in a fashion that causes undue or exceptional hard-ship may submit a request for adjust-ment or exception under § 700.80.

(e) A person may place a rated order for the minimum commercially pro-curable quantity even if the quantity needed to fill a rated order is less than that minimum. However, a person must combine rated orders as provided in paragraph (c) of this section, if pos-sible, to obtain minimum procurable quantities.

(f) A person is not required to place a priority rating on an order for less than $50,000, or one half of the Federal Acquisition Regulation (FAR) Sim-plified Acquisition Threshold (see FAR 2.101), whichever amount is larger, pro-vided that delivery can be obtained in a timely fashion without the use of the priority rating.


§ 700.18 Limitations on placing rated orders.

(a) General limitations. (1) A person may not place a DO or DX rated order unless entitled to do so under this reg-ulation.

(2) Rated orders may not be used to obtain:

(i) Delivery on a date earlier than needed;

(ii) A greater quantity of the item than needed, except to obtain a min-imum procurable quantity. Separate rated orders may not be placed solely for the purpose of obtaining minimum procurable quantities on each order;

(iii) Items in advance of the receipt of a rated order, except as specifically authorized by Commerce (see § 700.51(c) for information on obtaining author-ization for a priority rating in advance of a rated order); or

(iv) Any of the following items unless specific priority rating authority has

been obtained from a Delegate Agency or Commerce:

(A) Items for plant improvement, ex-pansion or construction, unless they will be physically incorporated into a construction project covered by a rated order; and

(B) Production or construction equip-ment or items to be used for the manu-facture of production equipment. [For information on requesting priority rat-ing authority, see § 700.51.]

(v) Any items related to the develop-ment of chemical or biological warfare capabilities or the production of chem-ical or biological weapons, unless such development or production has been authorized by the President or the Sec-retary of Defense.

(b) Jurisdiction limitations. (1) The pri-orities and allocations authority for certain items have been delegated under Executive Orders 12919 and 12742, other executive order, or Interagency Memoranda of Understanding to other agencies. Unless otherwise agreed to by the concerned agencies, the provisions of this part are not applicable to these items which include:

(i) Food resources, food resource fa-cilities, and the domestic distribution of farm equipment and commercial fer-tilizer (Department of Agriculture) (The Department of Agriculture and the Department of Commerce have agreed that the Department of Defense may place rated contracts and orders for food resources in support of troops, including but not limited to, meals ready to eat (MREs), ‘‘tray-packs’’ (T- rations), A-rations, and B-rations);

(ii) All forms of energy, including radioisotopes, stable isotopes, source material, and special nuclear material produced in Government-owned plants or facilities operated by or for the De-partment of Energy (Department of Energy);

(iii) Health resources (Department of Health and Human Services);

(iv) All forms of civil transportation (Department of Transportation);

(v) Water resources (Department of Defense/U.S. Army Corps of Engineers); and

(vi) Communications services (Na-tional Communications System under Executive Order 12472 of April 3, 1984).

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(2) The jurisdiction of the Depart-ment of Commerce and the Depart-ments of Energy and Agriculture over certain specific items included in the categories listed above has been clari-fied by Interagency Memoranda of Un-derstanding.

(3) The following items under the ju-risdiction of Commerce are currently excluded from the rating provisions of this regulation; however, these items are subject to Commerce Directives. These excluded items are:

Copper raw materials Crushed stone Gravel Sand Scrap Slag Steam heat, central Waste paper


Subpart E—Industrial Priorities for Energy Programs

§ 700.20 Use of priority ratings. (a) Section 101(c) of the Defense Pro-

duction Act authorizes the use of pri-ority ratings for projects which maxi-mize domestic energy supplies.

(b) Projects which maximize domes-tic energy supplies include those which maintain or further domestic energy exploration, production, refining, and transportation; maintain or further the conservation of energy; or are involved in the construction or maintenance of energy facilities.

§ 700.21 Application for priority rating authority.

(a) For projects believed to maximize domestic energy supplies, a person may request priority rating authority for scarce, critical, and essential supplies of materials, equipment, and services (related to the production of materials or equipment, or the installation, re-pair, or maintenance of equipment) by submitting a request to the Depart-ment of Energy. Further information may be obtained from the U.S. Depart-ment of Energy, Office of Electricity Delivery and Energy Reliability, 1000 Independence Avenue, SW., Wash-ington, DC 20585.

(b) On receipt of the application, the Department of Energy will:

(1) Determine if the project maxi-mizes domestic energy supplies; and

(2) Find whether the materials, equipment, or services involved in the application are critical and essential to the project.

(c) If the Department of Energy noti-fies Commerce that the project maxi-mizes domestic energy supplies and that the materials, equipment, or serv-ices are critical and essential, Com-merce must find whether the items in question are scarce and whether there is a need to use the priorities and allo-cations authorities.

(1) Scarcity implies an unusual dif-ficulty in obtaining the materials, equipment, or services in a timeframe consistent with the timely completion of the energy project. Among the fac-tors to be used in making the scarcity finding will be the following:

(i) Value and volume of material or equipment shipments;

(ii) Consumption of material and equipment;

(iii) Volume and market trends of imports and exports;

(iv) Domestic and foreign sources of supply;

(v) Normal levels of inventories; (vi) Rates of capacity utilization; (vii) Volume of new orders; and (viii) Lead times for new orders. (2) In finding whether there is a need

to use the priorities and allocations au-thorities, Commerce will consider al-ternative supply solutions and other measures.

(d) If Commerce does not find that the items of materials, equipment, or services are scarce, it will not proceed to analyze the need to use the prior-ities and allocations authorities.

(e) Commerce will inform the Depart-ment of Energy of the results of its analysis. If Commerce has made the two required findings, it will authorize the Department of Energy to grant the use of a priority rating to the appli-cant.

(f) Schedule I includes a list of ap-proved programs to support the maxi-mization of domestic energy supplies. A Department of Energy regulation

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setting forth the procedures and cri-teria used by the Department of En-ergy in making its determination and findings is published in 10 CFR part 216.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as amended at 63 FR 31923, June 11, 1998; 73 FR 34, Jan. 2, 2008]

Subpart F—National Emergency Preparedness and Critical Items

SOURCE: 63 FR 31923, June 11, 1998, unless otherwise noted.

§ 700.30 Priorities and allocations in a national emergency.

(a) In the event of a national emer-gency, special rules may be established as needed to supplement this part, thus ensuring rapid industrial response and the timely availability of critical in-dustrial items and facilities to meet the urgent national defense require-ments, including domestic emergency preparedness requirements, of approved programs.

(1) Emergency official actions. (i) As needed, this part may be supplemented to include additional definitions to cover civilian emergency preparedness industrial items, support for essential civilian programs, and provisions for the taking of certain emergency offi-cial actions under sections §§ 700.60 through 700.63.

(ii) Emergency official actions may include:

(A) Controlling inventories of critical and scarce defense and/or emergency preparedness items;

(B) Restricting the purchase, use, or distribution of critical and scarce de-fense and/or emergency preparedness items, or the use of production or dis-tribution facilities, for non-essential purposes; and

(C) Converting the production or dis-tribution of non-essential items to the production or distribution of critical and scarce defense and/or emergency preparedness items.

(2) Allocation of critical and scarce items and facilities. (i) As needed, this part may be supplemented to establish special rules for the allocation of scarce and critical items and facilities to ensure the timely availability of these items and facilities for approved programs, and to provide for an equi-

table and orderly distribution of re-quirements for such items among all suppliers of the items. These rules may provide for the allocation of individual items or they may be broad enough to direct general industrial activity as re-quired in support of emergency require-ments.

(ii) Allocation rules (i.e., controlled materials programs) were established in response to previous periods of na-tional security emergency such as World War II and the Korean Conflict. The basic elements of the controlled materials programs were the set-aside (the amount of an item for which a pro-ducer or supplier must reserve order book space in anticipation of the re-ceipt of rated orders), the production directive (requires a producer to supply a specific quantity, size, shape, and type of an item within a specific time period), and the allotment (the max-imum quantity of an item authorized for use in a specific program or appli-cation). These elements can be used to assure the availability of any scarce and critical item for approved pro-grams. Currently, a set-aside applies only to metalworking machines (see § 700.31).

(3) In the event that certain critical items become scarce, and approved pro-gram requirements for these items can-not be met without creating a signifi-cant dislocation in the civilian market place so as to create appreciable hard-ship, Commerce may establish special rules under section 101(b) of the De-fense Production Act to control the general distribution of such items in the civilian market.

(b) [Reserved]

[63 FR 31923, June 11, 1998, as amended at 71 FR 39528, July 13, 2006]

§ 700.31 Metalworking machines. (a) ‘‘Metalworking machines’’ in-

clude power driven, manual or auto-matic, metal cutting and metal form-ing machines and complete machines not supported in the hands of an oper-ator when in use. Basic machines with a list price of $2,500 or less are not cov-ered by this section.

(b) Metalworking machines covered by this section include:

Bending and forming machines

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Boring machines Broaching machines Drilling and tapping machines Electrical discharge, ultrasonic and chem-

ical erosion machines Forging machinery and hammers Gear cutting and finishing machines Grinding machines Hydraulic and pneumatic presses, power

driven Machining centers and way-type machines Manual presses Mechanical presses, power driven Milling machines Miscellaneous machine tools Miscellaneous secondary metal forming and

cutting machines Planers and shapers Polishing, lapping, boring, and finishing ma-

chines Punching and shearing machines Riveting machines Saws and filing machines Turning machines, lathes, including auto-

matic Wire and metal ribbon forming machines

(c) A metalworking machine pro-ducer is not required to accept DO rated orders calling for delivery in any month of a total quantity of any size of machine in excess of 60 percent of scheduled production of that size of machine for that month, or any DO rated orders received less than three months prior to the beginning of the month for which delivery is requested. However, DX rated orders must be ac-cepted without regard to a set-aside or the lead time, if delivery can be made by the required date.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989. Further redesignated at 63 FR 31924, June 11, 1998]

Subpart G [Reserved]

Subpart H—Special Priorities Assistance

§ 700.50 General provisions. (a) The DPAS is designed to be large-

ly self-executing. However, it is antici-pated that from time-to-time problems will occur. In this event, a person should immediately contact the appro-priate contract administration officer for guidance or assistance. If additional formal aid is needed, special priorities assistance should be sought from the Delegate Agency through the contract administration officer. If the Delegate

Agency is unable to resolve the prob-lem or to authorize the use of a pri-ority rating and believes additional as-sistance is warranted, the Delegate Agency may forward the request to the Department of Commerce for action. Special priorities assistance is a serv-ice provided to alleviate problems that do arise.

(b) Special priorities assistance can be provided for any reason in support of this regulation, such as assisting in obtaining timely deliveries of items needed to satisfy rated orders or au-thorizing the use of priority ratings on orders to obtain items not automati-cally ratable under this regulation.

(c) A request for special priorities as-sistance or priority rating authority must be submitted on Form BIS–999 (OMB control number 0694–0057) to the local contract administration rep-resentative. Form BIS–999 may be ob-tained from the Delegate Agency rep-resentative or from the Department of Commerce. A sample Form BIS–999 is attached at Appendix I.

[49 FR 30414, July 30, 1984; 49 FR 50171, Dec. 27, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as amended at 63 FR 31924, June 11, 1998]

§ 700.51 Requests for priority rating authority.

(a) If a rated order is likely to be de-layed because a person is unable to ob-tain items not normally rated under this regulation, the person may request the authority to use a priority rating in ordering the needed items. Examples of items for which priority ratings can be authorized include:

(1) Production or construction equip-ment;

(2) Computers when not used as pro-duction items; and

(3) Expansion, rebuilding or replacing plant facilities.

(b) Rating authority for production or construction equipment. (1) A request for priority rating authority for produc-tion or construction equipment must be submitted to the appropriate Dele-gate Agency. The Delegate Agency may establish particular forms to be used for these requests (e.g., Depart-ment of Defense Form DD 691.)

(2) When the use of a priority rating is authorized for the procurement of production or construction equipment,

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a rated order may be used either to purchase or to lease such equipment. However, in the latter case, the equip-ment may be leased only from a person engaged in the business of leasing such equipment or from a person willing to lease rather than sell.

(c) Rating authority in advance of a rated prime contract. (1) In certain cases and upon specific request, Commerce, in order to promote the national de-fense, may authorize a person to place a priority rating on an order to a sup-plier in advance of the issuance of a rated prime contract. In these in-stances, the person requesting advance rating authority must obtain sponsor-ship of the request from the appro-priate Delegate Agency. The person shall also assume any business risk as-sociated with the placing of rated or-ders if these orders have to be can-celled in the event the rated prime con-tract is not issued.

(2) The person must state the fol-lowing in the request:

It is understood that the authorization of a priority rating in advance of our receiving a rated prime contract from a Delegate Agen-cy and our use of that priority rating with our suppliers in no way commits the Dele-gate Agency, the Department of Commerce or any other government agency to enter into a contract or order or to expend funds. Further, we understand that the Federal Government shall not be liable for any can-cellation charges, termination costs, or other damages that may accrue if a rated prime contract is not eventually placed and, as a result, we must subsequently cancel or-ders placed with the use of the priority rat-ing authorized as a result of this request.

(3) In reviewing requests for rating authority in advance of a rated prime contract, Commerce will consider, among other things, the following cri-teria:

(i) The probability that the prime contract will be awarded;

(ii) The impact of the resulting rated orders on suppliers and on other au-thorized programs;

(iii) Whether the contractor is the sole source;

(iv) Whether the item being produced has a long lead time;

(v) The political sensitivity of the project; and

(vi) The time period for which the rating is being requested.

(4) Commerce may require periodic reports on the use of the rating author-ity granted under paragraph (c) of this section.

(5) If a rated prime contract is not issued, the person shall promptly no-tify all suppliers who have received rated orders pursuant to the advanced rating authority that the priority rat-ing on those orders is cancelled.

§ 700.52 Examples of assistance.

(a) While special priorities assistance may be provided for any reason in sup-port of this regulation, it is usually provided in situations where:

(1) A person is experiencing difficulty in obtaining delivery against a rated order by the required delivery date; or

(2) A person cannot locate a supplier for an item needed to fill a rated order.

(b) Other examples of special prior-ities assistance include:

(1) Ensuring that rated orders receive preferential treatment by suppliers;

(2) Resolving production or delivery conflicts between various rated orders;

(3) Assisting in placing rated orders with suppliers;

(4) Verifying the urgency of rated or-ders; and

(5) Determining the validity of rated orders.

§ 700.53 Criteria for assistance.

Requests for special priorities assist-ance should be timely, i.e., the request has been submitted promptly and enough time exists for the Delegate Agency or Commerce to effect a mean-ingful resolution to the problem, and must establish that:

(a) There is an urgent need for the item; and

(b) The applicant has made a reason-able effort to resolve the problem.

§ 700.54 Instances where assistance will not be provided.

Special priorities assistance is pro-vided at the discretion of the Delegate Agencies and Commerce when it is de-termined that such assistance is war-ranted to meet the objectives of this regulation. Examples where assistance may not be provided include situations when a person is attempting to:

(a) Secure a price advantage;

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(b) Obtain delivery prior to the time required to fill a rated order;

(c) Gain competitive advantage; (d) Disrupt an industry apportion-

ment program in a manner designed to provide a person with an unwarranted share of scarce items; or

(e) Overcome a supplier’s regularly established terms of sale or conditions of doing business.


§ 700.55 Assistance programs with Canada and other nations.

(a) To promote military assistance to foreign nations, this section provides for authorizing priority ratings to per-sons in Canada and in other foreign na-tions to obtain items in the United States in support of approved pro-grams. Although priority ratings have no legal authority outside of the United States, this section also pro-vides information on how persons in the United States may obtain informal assistance in Canada, Italy, The Neth-erlands, Sweden, and the United King-dom in support of approved programs.

(b) Canada. (1) The joint U.S.-Cana-dian military arrangements for the de-fense of North America and the inte-grated nature of their defense indus-tries as set forth in the U.S.-Canadian Statement of Principles for Economic Co-operation (October 26, 1950) require close coordination and the establish-ment of a means to provide mutual as-sistance to the defense industries lo-cated in both countries.

(2) The Department of Commerce co-ordinates with the Canadian Public Works and Government Services Can-ada on all matters of mutual concern relating to the administration of this regulation.

(3) Any person in the United States ordering defense items in Canada in support of an approved program should inform the Canadian supplier that the items being ordered are to be used to fill a rated order. The Canadian sup-plier should be informed that if produc-tion materials are needed from the United States by the supplier or the supplier’s vendor to fill the order, the supplier or vendor should contact the Canadian Public Works and Govern-

ment Services Canada, for authority to place rated orders in the United States: Public Works and Government Services Canada, Acquisitions Branch, Business Management Directorate, Phase 3, Place du Portage, Level 0A1, 11 Laurier Street, Gatineau, Quebec, K1A 0S5, Canada; telephone: (819) 956–6825; Fax: (819) 956–7827.

(4) Any person in Canada producing defense items for the Canadian govern-ment may also obtain priority rating authority for items to be purchased in the United States by applying to the Canadian Public Works and Govern-ment Services Canada, Acquisitions Branch, Business Management Direc-torate, in accordance with its proce-dures.

(5) Persons in Canada needing special priorities assistance in obtaining de-fense items in the United States may apply to the Canadian Public Works and Government Services Canada, Ac-quisitions Branch, Business Manage-ment Directorate, for such assistance. Public Works and Government Services Canada will forward appropriate re-quests to the U.S. Department of Com-merce.

(6) Any person in the United States requiring assistance in obtaining items in Canada must submit a request through the Delegate Agency to Com-merce on Form BIS–999. Commerce will forward appropriate requests to the Ca-nadian Public Works and Government Services Canada.

(c) Foreign nations. (1) Any person in a foreign nation other than Canada re-quiring assistance in obtaining defense items in the United States or priority rating authority for defense items to be purchased in the United States, should submit a request for such assist-ance or rating authority to the Office of the Deputy Under Secretary of De-fense (Industrial Policy): Office of the Deputy Under Secretary of Defense (In-dustrial Policy), 3330 Defense Pen-tagon, Washington, DC 20301; tele-phone: (703) 697–0051; Fax: (703) 695–4277.

(i) If the end product is being ac-quired by a U.S. government agency, the request should be submitted to the Office of the Deputy Under Secretary of Defense (Industrial Policy) through the U.S. contract administration rep-resentative.

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(ii) If the end product is being ac-quired by a foreign nation, the request must be sponsored prior to its submis-sion to the Office of the Deputy Under Secretary of Defense (Industrial Pol-icy) by the government of the foreign nation that will use the end product.

(2) If the Department of Defense en-dorses the request, it will be forwarded to Commerce for appropriate action.

(d) Requesting assistance in Italy, The Netherlands, Sweden, and the United Kingdom. (1) The U.S. Department of Defense has entered into bilateral secu-rity of supply arrangements with Italy, The Netherlands, Sweden, and the United Kingdom that allow the U.S. Department of Defense to request the priority delivery for U.S. Department of Defense contracts, subcontracts, and orders from companies in these coun-tries.

(2) Any person in the United States requiring assistance in obtaining the priority delivery of a contract, sub-contract, or order in Italy, The Nether-lands, Sweden, or the United Kingdom to support an approved program should contact the Office of the Deputy Under Secretary of Defense (Industrial Pol-icy) for assistance. Persons in Italy, The Netherlands, Sweden, and the United Kingdom should request assist-ance in accordance with § 700.55(c)(1).

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as amended at 63 FR 31924, June 11, 1998; 71 FR 39528, July 13, 2006; 71 FR 54904, Sept. 20, 2006]

Subpart I—Official Actions

§ 700.60 General provisions.

(a) Commerce may, from time-to- time, take specific official actions to implement or enforce the provisions of this regulation.

(b) Several of these official actions (Rating Authorizations, Directives, and Letters of Understanding) are discussed in this subpart. Other official actions which pertain to compliance (Adminis-trative Subpoenas, Demands for Infor-mation, and Inspection Authorizations) are discussed in § 700.71(c).

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as amended at 71 FR 39528, July 13, 2006]

§ 700.61 Rating Authorizations.

(a) A Rating Authorization is an offi-cial action granting specific priority rating authority that:

(1) Permits a person to place a pri-ority rating on an order for an item not normally ratable under this regulation; or

(2) Authorizes a person to modify a priority rating on a specific order or series of contracts or orders.

(b) To request priority rating author-ity, see § 700.51.

§ 700.62 Directives.

(a) A Directive is an official action which requires a person to take or re-frain from taking certain actions in ac-cordance with its provisions.

(b) A person must comply with each Directive issued. However, a person may not use or extend a Directive to obtain any items from a supplier, un-less expressly authorized to do so in the Directive.

(c) Directives take precedence over all DX rated orders, DO rated orders, and unrated orders previously or subse-quently received, unless a contrary in-struction appears in the Directive.

§ 700.63 Letters of Understanding.

(a) A Letter of Understanding is an official action which may be issued in resolving special priorities assistance cases to reflect an agreement reached by all parties (Commerce, the Delegate Agency, the supplier, and the cus-tomer).

(b) A Letter of Understanding is not used to alter scheduling between rated orders, to authorize the use of priority ratings, to impose restrictions under this regulation, or to take other offi-cial actions. Rather, Letters of Under-standing are used to confirm produc-tion or shipping schedules which do not require modifications to other rated or-ders.

Subpart J—Compliance

§ 700.70 General provisions.

(a) Compliance actions may be taken for any reason necessary or appropriate to the enforcement or the administra-tion of the Defense Production Act, the

100


Selective Service Act and related stat-utes, this regulation, or an official ac-tion. Such actions include audits, in-vestigations, or other inquiries.

(b) Any person who places or receives a rated order should be thoroughly fa-miliar with, and must comply with, the provisions of this regulation.

(c) Willful violation of any of the pro-visions of Title I or section 705 of the Defense Production Act, this regula-tion, or an official action of the De-partment of Commerce, is a criminal act, punishable as provided in the De-fense Production Act and as set forth in § 700.74 of this regulation.


§ 700.71 Audits and investigations. (a) Audits and investigations are offi-

cial examinations of books, records, documents, other writings and infor-mation to ensure that the provisions of the Defense Production Act, the Selec-tive Service Act and related statutes, this regulation, and official actions have been properly followed. An audit or investigation may also include interviews and a systems evaluation to detect problems or failures in the im-plementation of this regulation.

(b) When undertaking an audit, in-vestigation, or other inquiry, the De-partment of Commerce shall:

(1) Define the scope and purpose in the official action given to the person under investigation, and

(2) Have ascertained that the infor-mation sought or other adequate and authoritative data are not available from any Federal or other responsible agency.

(c) In administering this regulation, Commerce may issue the following doc-uments which constitute official ac-tions:

(1) Administrative Subpoenas. An Ad-ministrative Subpoena requires a per-son to appear as a witness before an of-ficial designated by the Department of Commerce to testify under oath on matters of which that person has knowledge relating to the enforcement or the administration of the Defense Production Act, the Selective Service Act and related statutes, this regula-tion, or official actions. An Adminis-

trative Subpoena may also require the production of books, papers, records, documents and physical objects or property.

(2) Demand for Information. A Demand for Information requires a person to furnish to a duly authorized represent-ative of the Department of Commerce any information necessary or appro-priate to the enforcement or the ad-ministration of the Defense Production Act, the Selective Service Act and re-lated statutes, this regulation, or offi-cial actions.

(3) Inspection Authorizations. An In-spection Authorization requires a per-son to permit a duly authorized rep-resentative of Commerce to interview the person’s employees or agents, to in-spect books, records, documents, other writings and information in the per-son’s possession or control at the place where that person usually keeps them, and to inspect a person’s property when such interviews and inspections are necessary or appropriate to the en-forcement or the administration of the Defense Production Act, the Selective Service Act and related statutes, this regulation, or official actions.

(d) The production of books, records, documents, other writings and infor-mation will not be required at any place other than where they are usu-ally kept if, prior to the return date specified in the Administrative Sub-poena or Demand for Information, a duly authorized official of Commerce is furnished with copies of such material that are certified under oath to be true copies. As an alternative, a person may enter into a stipulation with a duly au-thorized official of Commerce as to the content of the material.

(e) An Administrative Subpoena, De-mand for Information, or Inspection Authorization, shall include the name, title or official position of the person to be served, the evidence sought to be adduced, and its general relevance to the scope and purpose of the audit, in-vestigation, or other inquiry. If em-ployees or agents are to be interviewed; if books, records, documents, other writings, or information are to be pro-duced; or if property is to be inspected; the Administrative Subpoena, Demand

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for Information, or Inspection Author-ization will describe them with par-ticularity.

(f) Service of documents shall be made in the following manner:

(1) Service of a Demand for Informa-tion or Inspection Authorization shall be made personally, or by Certified Mail—Return Receipt Requested at the person’s last known address. Service of an Administrative Subpoena shall be made personally. Personal service may also be made by leaving a copy of the document with someone of suitable age and discretion at the person’s last known dwelling or place of business.

(2) Service upon other than an indi-vidual may be made by serving a part-ner, corporate officer, or a managing or general agent authorized by appoint-ment or by law to accept service of process. If an agent is served, a copy of the document shall be mailed to the person named in the document.

(3) Any individual 18 years of age or over may serve an Administrative Sub-poena, Demand for Information, or In-spection Authorization. When personal service is made, the individual making the service shall prepare an affidavit as to the manner in which service was made and the identity of the person served, and return the affidavit, and in the case of subpoenas, the original doc-ument, to the issuing officer. In case of failure to make service, the reasons for the failure shall be stated on the origi-nal document.


§ 700.72 Compulsory process.

(a) If a person refuses to permit a duly authorized representative of Com-merce to have access to any premises or source of information necessary to the administration or the enforcement of the Defense Production Act, the Se-lective Service Act and related stat-utes, this regulation, or official ac-tions, the Commerce representative may seek compulsory process. Compul-sory process means the institution of appropriate legal action, including ex parte application for an inspection war-rant or its equivalent, in any forum of appropriate jurisdiction.

(b) Compulsory process may be sought in advance of an audit, inves-tigation, or other inquiry, if, in the judgment of the Director of the Office of Strategic Industries and Economic Security, U.S. Department of Com-merce, in consultation with the Chief Counsel for Industry and Security, U.S. Department of Commerce, there is rea-son to believe that a person will refuse to permit an audit, investigation, or other inquiry, or that other cir-cumstances exist which make such process desirable or necessary.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as amended at 63 FR 31924, June 11, 1998; 67 FR 45633, July 10, 2002; 71 FR 39528, July 13, 2006]

§ 700.73 Notification of failure to com-ply.

(a) At the conclusion of an audit, in-vestigation, or other inquiry, or at any other time, Commerce may inform the person in writing where compliance with the requirements of the Defense Production Act, the Selective Service Act and related statutes, this regula-tion, or an official action were not met.

(b) In cases where Commerce deter-mines that failure to comply with the provisions of the Defense Production Act, the Selective Service Act and re-lated statutes, this regulation, or an official action was inadvertent, the person may be informed in writing of the particulars involved and the cor-rective action to be taken. Failure to take corrective action may then be construed as a willfull violation of the Defense Production Act, this regula-tion, or an official action.


§ 700.74 Violations, penalties, and rem-edies.

(a) Willful violation of the provisions of Title I or Sections 705 or 707 of the Defense Production Act, the priorities provisions of the Selective Service Act and related statutes, this part, or an official action, is a crime and upon conviction, a person may be punished by fine or imprisonment, or both. The maximum penalty provided by the De-fense Production Act is a $10,000 fine, or one year in prison, or both. The

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maximum penalty provided by the Se-lective Service Act and related stat-utes is a $50,000 fine, or three years in prison, or both.

(b) The government may also seek an injunction from a court of appropriate jurisdiction to prohibit the continu-ance of any violation of, or to enforce compliance with, the Defense Produc-tion Act, this regulation, or an official action.

(c) In order to secure the effective en-forcement of the Defense Production Act, this regulation, and official ac-tions, the following are prohibited (see section 704 of the Defense Production Act; see also, for example, sections 2 and 371 of Title 18, United States Code):

(1) No person may solicit, influence or permit another person to perform any act prohibited by, or to omit any act required by, the Defense Produc-tion Act, this regulation, or an official action.

(2) No person may conspire or act in concert with any other person to per-form any act prohibited by, or to omit any act required by, the Defense Pro-duction Act, this regulation, or an offi-cial action.

(3) No person shall deliver any item if the person knows or has reason to be-lieve that the item will be accepted, re-delivered, held, or used in violation of the Defense Production Act, this regu-lation, or an official action. In such in-stances, the person must immediately notify the Department of Commerce that, in accordance with this provision, delivery has not been made.


§ 700.75 Compliance conflicts. If compliance with any provision of

the Defense Production Act, the Selec-tive Service Act and related statutes, this regulation, or an official action would prevent a person from filling a rated order or from complying with an-other provision of the Defense Produc-tion Act, this regulation, or an official action, the person must immediately notify the Department of Commerce for resolution of the conflict.


Subpart K—Adjustments, Exceptions, and Appeals

§ 700.80 Adjustments or exceptions.

(a) A person may submit a request to the Office of Strategic Industries and Economic Security, U.S. Department of Commerce, for an adjustment or ex-ception on the ground that:

(1) A provision of this regulation or an official action results in an undue or exceptional hardship on that person not suffered generally by others in similar situations and circumstances; or

(2) The consequence of following a provision of this regulation or an offi-cial action is contrary to the intent of the Defense Production Act, the Selec-tive Service Act and related statutes, or this regulation.

(b) Each request for adjustment or exception must be in writing and con-tain a complete statement of all the facts and circumstances related to the provision of this regulation or official action from which adjustment is sought and a full and precise statement of the reasons why relief should be pro-vided.

(c) The submission of a request for adjustment or exception shall not re-lieve any person from the obligation of complying with the provision of this regulation or official action in ques-tion while the request is being consid-ered unless such interim relief is grant-ed in writing by the Office of Strategic Industries and Economic Security.

(d) A decision of the Office of Stra-tegic Industries and Economic Security under this section may be appealed to the Assistant Secretary for Export Ad-ministration, U.S. Department of Com-merce. (For information on the appeal procedure, see § 700.81.)

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as amended at 63 FR 31924, 31925, June 11, 1998]

§ 700.81 Appeals.

(a) Any person who has had a request for adjustment or exception denied by the Office of Strategic Industries and Economic Security under § 700.80, may appeal to the Assistant Secretary for

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Export Administration, U.S. Depart-ment of Commerce, who shall review and reconsider the denial.

(b) An appeal must be received by the Office of the Assistant Secretary for Export Administration, Bureau of In-dustry and Security, U.S. Department of Commerce, Washington, D. C. 20230, Ref: DPAS, no later than 45 days after receipt of a written notice of denial from the Office of Strategic Industries and Economic Security. After this 45- day period, an appeal may be accepted at the discretion of the Assistant Sec-retary for Export Administration for good cause shown.

(c) Each appeal must be in writing and contain a complete statement of all the facts and circumstances related to the action appealed from and a full and precise statement of the reasons the decision should be modified or re-versed.

(d) In addition to the written mate-rials submitted in support of an appeal, an appellant may request, in writing, an opportunity for an informal hear-ing. This request may be granted or de-nied at the discretion of the Assistant Secretary for Export Administration.

(e) When a hearing is granted, the As-sistant Secretary for Export Adminis-tration may designate an employee of the Department of Commerce to con-duct the hearing and to prepare a re-port. The hearing officer shall deter-mine all procedural questions and im-pose such time or other limitations deemed reasonable. In the event that the hearing officer decides that a print-ed transcript is necessary, all expenses shall be borne by the appellant.

(f) When determining an appeal, the Assistant Secretary for Export Admin-istration may consider all information submitted during the appeal as well as any recommendations, reports, or other relevant information and docu-ments available to the Department of Commerce, or consult with any other persons or groups.

(g) The submission of an appeal under this section shall not relieve any per-son from the obligation of complying with the provision of this regulation or official action in question while the ap-peal is being considered unless such re-lief is granted in writing by the Assist-

ant Secretary for Export Administra-tion.

(h) The decision of the Assistant Sec-retary for Export Administration shall be made within a reasonable time after receipt of the appeal and shall be the final administrative action. It shall be issued to the appellant in writing with a statement of the reasons for the deci-sion.


Subpart L—Miscellaneous Provisions

§ 700.90 Protection against claims. A person shall not be held liable for

damages or penalties for any act or failure to act resulting directly or indi-rectly from compliance with any provi-sion of this regulation, or an official action, notwithstanding that such pro-vision or action shall subsequently be declared invalid by judicial or other competent authority.

§ 700.91 Records and reports. (a) Persons are required to make and

preserve for at least three years, accu-rate and complete records of any trans-action covered by this regulation (OMB control number 0694–0053) or an official action.

(b) Records must be maintained in sufficient detail to permit the deter-mination, upon examination, of wheth-er each transaction complies with the provisions of this regulation or any of-ficial action. However, this regulation does not specify any particular method or system to be used.

(c) Records required to be maintained by this regulation must be made avail-able for examination on demand by duly authorized representatives of Commerce as provided in § 700.71.

(d) In addition, persons must develop, maintain, and submit any other records and reports to Commerce that may be required for the administration of the Defense Production Act, the Se-lective Service Act and related stat-utes, and this regulation.

(e) Section 705(e) of the Defense Pro-duction Act provides that information obtained under this section which the

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President deems confidential, or with reference to which a request for con-fidential treatment is made by the per-son furnishing such information, shall not be published or disclosed unless the President determines that the with-holding of this information is contrary to the interest of the national defense. Information required to be submitted to Commerce in connection with the enforcement or administration of the Act, this regulation, or an official ac-tion, is deemed to be confidential under section 705(e) of the Act and shall not be published or disclosed ex-cept as required by law.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as amended at 63 FR 31924, 31925, June 11, 1998]

§ 700.92 Applicability of this regulation and official actions.

(a) This regulation and all official ac-tions, unless specifically stated other-wise, apply to transactions in any state, territory, or possession of the United States and the District of Co-lumbia.

(b) This regulation and all official ac-tions apply not only to deliveries to other persons but also include deliv-eries to affiliates and subsidiaries of a person and deliveries from one branch, division, or section of a single entity to another branch, division, or section under common ownership or control.

(c) This regulation and its schedules shall not be construed to affect any ad-

ministrative actions taken by Com-merce, or any outstanding contracts or orders placed pursuant to any of the regulations, orders, schedules or dele-gations of authority under the Defense Materials System and Defense Prior-ities System previously issued by Com-merce. Such actions, contracts, or or-ders shall continue in full force and ef-fect under this regulation unless modi-fied or terminated by proper authority.

(d) The repeal of the regulations, or-ders, schedules and delegations of au-thority of the Defense Materials Sys-tem (DMS) and Defense Priorities Sys-tem (DPS) shall not have the effect to release or extinguish any penalty or li-ability incurred under the DMS/DPS. The DMS/DPS shall be treated as still remaining in force for the purpose of sustaining any action for the enforce-ment of such penalty or liability.

§ 700.93 Communications.

All communications concerning this regulation, including requests for cop-ies of the regulation and explanatory information, requests for guidance or clarification, and requests for adjust-ment or exception shall be addressed to the Office of Strategic Industries and Economic Security, Room 3876, U.S. Department of Commerce, Washington, DC 20230, Ref: DPAS; telephone: (202) 482–3634 or fax: (202) 482–5650.

[71 FR 39528, July 13, 2006]

SCHEDULE I TO PART 700—APPROVED PROGRAMS AND DELEGATE AGENCIES

The programs listed in this schedule have been approved for priorities and allocations sup-port under this part. They have equal preferential status. The Department of Commerce has authorized the Delegate Agencies to use this part in support of those programs assigned to them, as indicated below.

Program identification symbol Approved program Delegate agency

Defense programs: A1 ............................................... Aircraft ................................................................... Department of Defense. 1 A2 ............................................... Missiles .................................................................. Do. A3 ............................................... Ships ..................................................................... Do. A4 ............................................... Tank—Automotive ................................................. Do. A5 ............................................... Weapons ............................................................... Do. A6 ............................................... Ammunition ........................................................... Do. A7 ............................................... Electronic and communications equipment .......... Do. B1 ............................................... Military building supplies ....................................... Do. B8 ............................................... Production equipment (for defense contractor’s

account).Do.

B9 ............................................... Production equipment (Government owned) ........ Do. C1 ............................................... Food resources (combat rations) .......................... Do. C2 ............................................... Department of Defense construction .................... Do.

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Program identification symbol Approved program Delegate agency

C3 ............................................... Maintenance, repair, and operating supplies (MRO) for Department of Defense facilities.

Do.

C9 ............................................... Miscellaneous ........................................................ Do. International defense programs:

Canada: D1 ........................................ Canadian military programs .................................. Department of Commerce. D2 ........................................ Canadian production and construction ................. Do. D3 ........................................ Canadian atomic energy program ........................ Do.

Other Foreign Nations: G1 ........................................ Certain munitions items purchased by foreign

governments through domestic commercial channels for export.

Department of Commerce.

G2 ........................................ Certain direct defense needs of foreign govern-ments other than Canada.

Do.

G3 ........................................ Foreign nations (other than Canada) production and construction.

Do.

Co-Production: J1 ......................................... F–16 Co-Production Program ............................... Departments of Commerce and De-

fense. Atomic energy programs:

E1 ............................................... Construction .......................................................... Department of Energy. E2 ............................................... Operations—including maintenance, repair, and

operating supplies (MRO).Do.

E3 ............................................... Privately owned facilities ....................................... Do. Domestic energy programs:

F1 ................................................ Exploration, production, refining, and transpor-tation.

Department of Energy.

F2 ................................................ Conservation ......................................................... Do. F3 ................................................ Construction, repair, and maintenance ................. Do.

Other defense, energy, and related programs:

H1 ............................................... Certain combined orders (see section 700.17(c)) Department of Commerce. H5 ............................................... Private domestic production .................................. Do. H6 ............................................... Private domestic construction ............................... Do. H7 ............................................... Maintenance, repair, and operating supplies

(MRO).Do.

H8 ............................................... Designated Programs ........................................... Do. K1 ............................................... Federal supply items ............................................. General Services Administration.

Homeland security programs: N1 ............................................... Federal emergency preparedness, mitigation, re-

sponse, and recovery.Department of Homeland Security.

N2 ............................................... State, local, tribal government emergency pre-paredness, mitigation, response, and recovery.

Do.

N3 ............................................... Intelligence and warning systems ......................... Do. N4 ............................................... Border and transportation security ........................ Do. N5 ............................................... Domestic counter-terrorism, including law en-

forcement.Do.

N6 ............................................... Chemical, biological, radiological, and nuclear countermeasures.

Do.

N7 ............................................... Critical infrastructure protection and restoration ... Do. N8 ............................................... Miscellaneous ........................................................ Do.

1 Department of Defense includes: The Office of the Secretary of Defense, the Military Departments, the Joint Staff, the Com-batant Commands, the Defense Agencies, the Defense Field Activities, all other organizational entities in the Department of De-fense, and, for purposes of this regulation, the Central Intelligence Agency and the National Aeronautics and Space Administra-tion as Associated Agencies.

[63 FR 31925, June 11, 1998, as amended at 71 FR 39529, July 13, 2006; 72 FR 3944, Jan. 29, 2007]

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APPENDIX I TO PART 700—FORM BIS–999—REQUEST FOR SPECIAL PRIORITIES ASSISTANCE

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[71 FR 39529, July 13, 2006]

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15 CFR Ch. VII (1–1–12 Edition) Pt. 701

PART 701—REPORTING OF OFFSETS AGREEMENTS IN SALES OF WEAPON SYSTEMS OR DEFENSE- RELATED ITEMS TO FOREIGN COUNTRIES OR FOREIGN FIRMS

Sec. 701.1 Purpose. 701.2 Definitions. 701.3 Applicability and scope. 701.4 Procedures. 701.5 Confidentiality. 701.6 Violations, penalties, and remedies.

AUTHORITY: 50 U.S.C. App. 2099 and Execu-tive Order 12919, 59 FR 29525, 3 CFR, 1994 Comp. 901 and Executive Order 13286, 68 FR 10619, 3 CFR, 2003 Comp. 166.

SOURCE: 59 FR 61796, Dec. 2, 1994, unless otherwise noted.

§ 701.1 Purpose. The Defense Production Act Amend-

ments of 1992 require the Secretary of Commerce to promulgate regulations for U.S. firms entering into contracts for the sale of defense articles or de-fense services to foreign countries or foreign firms that are subject to offset agreements exceeding $5,000,000 in value to furnish information regarding such agreements. The Secretary of Commerce has designated the Bureau of Industry and Security as the organi-zation responsible for implementing this provision. The information pro-vided by U.S. firms will be aggregated and used to determine the impact of offset transactions on the defense pre-paredness, industrial competitiveness, employment, and trade of the United States. Summary reports are sub-mitted annually to Congress pursuant to Section 309 of the Defense Produc-tion Act of 1950, as amended.

[59 FR 61796, Dec. 2, 1994, as amended at 74 FR 68140, Dec. 23, 2009]

§ 701.2 Definitions. (a) Offsets—Compensation practices

required as a condition of purchase in either government-to-government or commercial sales of defense articles and/or defense services as defined by the Arms Export Control Act and the International Traffic in Arms Regula-tions.

(b) Military Export Sales—Exports that are either Foreign Military Sales (FMS) or commercial (direct) sales of

defense articles and/or defense services as defined by the Arms Export Control Act and International Traffic in Arms Regulations.

(c) Prime Contractor—A firm that has a sales contract with a foreign entity or with the U.S. Government for mili-tary export sales.

(d) United States—Includes the 50 states, the District of Columbia, Puer-to Rico, and U.S. territories.

(e) Offset Agreement—Any offset as de-fined above that the U.S. firm agrees to in order to conclude a military export sales contract. This includes all offsets, whether they are ‘‘best effort’’ agree-ments or are subject to penalty clauses.

(f) Offset Transaction—Any activity for which the U.S. firm claims credit for full or partial fulfillment of the off-set agreement. Activities to implement offset agreements are categorized as co-production, technology transfer, subcontracting, credit assistance, training, licensed production, invest-ment, purchases and other. Paragraphs (f)(1) through (f)(8) of this section pro-vide examples of the categories of off-set transactions.

(1) Example 1. Company A, a U.S. firm, contracts for Company B, a for-eign firm located in country C, to produce a component of a U.S.-origin defense article subject to an offset agreement between Company A and country C. The defense article will be sold to country C pursuant to a For-eign Military Sale and the production role of Company B is described in the Letter of Offer and Acceptance associ-ated with that sale and a government- to-government co-production memo-randum of understanding. This trans-action would be categorized as co-pro-duction and would, like all co-produc-tion transactions, be direct.

(2) Example 2. Company A, a U.S. firm, transfers technology to Company B, a foreign firm located in country C, which allows Company B to conduct re-search and development directly re-lated to a defense article that is sub-ject to an offset agreement between Company A and country C. This trans-action would be categorized as tech-nology transfer and would be direct be-cause the research and development is

Documents

SUBCHAPTER A—NATIONAL SECURITY INDUSTRIAL BASE REGULATIONS · Subpart L—Miscellaneous Provisions ... parts D through L. [49 FR 30414, July 30, 1984. ... Letters of Understanding,